Last summer, Alberta natural gas prices staged a remarkable turnaround from the dismal lows and extreme volatility experienced the prior three summers. The price rise is widely credited to a temporary gas flow mechanism put in place by the operator of Alberta’s gas pipeline grid to combat congestion and oversupply issues associated with construction and maintenance during the summer of 2020. However, this temporary mechanism was just that — temporary — and will not be reinstated this summer. Without it, there is concern among Western Canadian gas producers that the weakness and volatility in gas prices seen during past summers might return this year. With warmer weather on the horizon, today we consider these issues and the potential for renewed price weakness in the Alberta natural gas market this year.
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Canada’s AECO natural gas price benchmark enjoyed some wild times last month as what’s now called the Deep Freeze enveloped much of North America, pushing up prices to levels not seen since 2014. The February spike was a notable outlier in what has been a recovery story for AECO prices that began in 2020 — a recovery, it must be said, that followed an awful couple of years. We discussed some of the brutal price lows in 2017-19 and a few of the reasons behind them in Don’t Do Me Like That and Don’t Be Afraid. We noted that AECO prices during the gas storage injection seasons (April through October) for those three years were often trading at pennies or, on a few occasions, even went negative. The reasons behind the weak prices and eventual recovery in 2020 are numerous and will be detailed shortly, but a brief background is needed on Alberta’s primary natural gas pipeline network.
TC Energy’s Nova Gas Transmission Limited (NGTL; yellow lines in Figure 1) is a natural gas pipeline system that spans Alberta and northeastern British Columbia (BC). This vast system transports about 80% of all the natural gas produced in Western Canada and is connected to all the storage sites across Alberta, which have a total of about 480 Bcf of working gas storage capacity.
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About the song
"Undun" was written by Randy Bachman and appears as the fourth song on side one of The Guess Who's fifth studio album, Canned Wheat. Initially released as the B-side to the single "Laughing" in July 1969, the song went to #15 on the Billboard Adult Contemporary chart and #22 on the Hot 100 Singles chart. The song's author, Randy Bachman, has stated that "Undun" is his favorite song from his time as a member of The Guess Who. Personnel on the record were: Burton Cummings (vocals, flute), Randy Bachman (guitar), Jim Kale (bass), and Garry Peterson (drums).
Canned Wheat was recorded at A&R Studios and RCA Studio A in New York City, with Jack Richardson producing. Released in September 1969, the album went to #91 on the Billboard Top 200 Albums chart. The album included the first version of "No Time," which would be re-recorded for inclusion on the band's American Woman album and released as a single. Three singles were released from Canned Wheat.
The Guess Who are a Canadian rock band formed in Winnipeg, MB, in 1965. Sixteen band members have passed through the band since its formation. The classic era of the band was from 1968 to 1975, the year in which lead singer Burton Cummings left the band to pursue a solo career. Guitarist and main songwriter, Randy Bachman, exited in 1970 to form Bachman-Turner Overdrive. The Guess Who have released 20 studio albums, 10 live albums, 20 compilation albums, and 56 singles. The band still tours under the direction of Garry Peterson, their longtime drummer.
